Combining corporate and commercial jet operations will streamline organization, expedite decision-making
- Cost-conscious amid rising orders
- Uncertain job losses
- "… less bureaucracy, closer collaboration, and faster processes"
Despite record order volume for new jets, Airbus continues to exceed production costs on several commercial aircraft series. In July, it announced that just 12 of its A380 wide-body jets are due to be delivered in 2018, compared to 27 delivered last year. While the A380 program remains profitable at current production rates, Airbus cautioned the reduced rate would threaten its profits.
Airbus Group SE plans to merge its corporate headquarters and commercial aircraft businesses, an effort to streamline the organization and improve its profitability. Airbus CEO Tom Enders emphasized that the restructuring would return significant savings, expedite decision-making, and bring the group closer to the profitability standards set by the investment community for the OEM (and its primary rival, The Boeing Co.)
Both Boeing and Airbus are enjoying an extraordinary increase in commercial aircraft orders as airlines expand service and replace older aircraft, which is focusing investors’ attention on their organizational efficiency and profit margins.
For example, Airbus is reported to be facing significant losses related to the development and production of its A380 wide-body aircraft, due to weakening demand, though its single-aisle jet programs continue to be in heavy demand. The A380 is assembled in Toulouse, France, from systems and structures that are manufactured and sub-assembled at numerous locations that signify various predecessor companies now incorporated into the Airbus organization.
It’s not clear how many jobs Airbus will eliminate in the consolidation effort, but Enders emphasized the number would be fewer than the nearly 8,000 positions it cut in a 2013 restructuring that combined the defense and space businesses. Both the Airbus corporate unit and the commercial aircraft business are based in Toulouse, and the headquarters will remain there.
Enders will be the head of the revamped organization, with head of the former Airbus Commercial Aircraft unit, Fabrice Brégier, in a new role as group chief operating officer. His responsibilities cover supply chain management and other manufacturing functions as the group consolidates its activities to reduce organizational waste.
Two other divisions, Airbus Defence and Space and Airbus Helicopters, will be part of the group, and Enders predicted both would “derive considerable benefit from the merger through more focused business support and reduced costs.”
“We are bringing Team Airbus closer together,” according to Enders, “recognizing that our Commercial Aircraft Division is by far the largest contributor to our company’s revenues and financials. We are committed to delivering the next level of performance by, for example, further streamlining our corporate structures and establishing a simpler and leaner organization overall with less bureaucracy, closer collaboration, and faster processes.”